Locational Marginal Pricing aims to free UK power markets.
problem Unfree and regulated power markets.
method Implementing Locational Marginal Pricing.
result Increased economic freedom, reduced prices, decreased losses, incentivized investment.
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48 results for “Locational Marginal Pricing”
We study the structure of locational marginal prices in day-ahead and real-time wholesale electricity markets. In particular, we consider the case of two North American markets and show that the price correlations contain information on the locational structure of the grid. We study various clustering methods and intro…
Paper proposes a GAN-based approach for RTLMP prediction.
problem Predicting real-time locational marginal prices (RTLMPs) in power markets.
method GAN-based video prediction model for spatio-temporal correlations.
result Proposed method accurately predicts RTLMPs without confidential information.
The potential of recovering the topology of a grid using solely publicly available market data is explored here. In contemporary whole-sale electricity markets, real-time prices are typically determined by solving the network-constrained economic dispatch problem. Under a linear DC model, locational marginal prices (LM…
In this work, we study a new approach to optimizing the margin distribution realized by binary classifiers. The classical approach to this problem is simply maximization of the expected margin, while more recent proposals consider simultaneous variance control and proxy objectives based on robust location estimates, in…
Probabilistic Forecasting and Simulation of Electricity Markets via Online Dictionary Learningstat.AP
The problem of probabilistic forecasting and online simulation of real-time electricity market with stochastic generation and demand is considered. By exploiting the parametric structure of the direct current optimal power flow, a new technique based on online dictionary learning (ODL) is proposed. The ODL approach inc…
Adopting a zonal structure of electricity market requires specification of zones' borders. In this paper we use social welfare as the measure to assess quality of various zonal divisions. The social welfare is calculated by Market Coupling algorithm. The analyzed divisions are found by the usage of extended Locational …
Proposes a model for clearing prices in financial markets due to margin calls.
problem Determining prices in financial markets following margin calls and short squeezes.
method Developed an explicit formulation for clearing prices after margin calls and short squeezes.
result Identified a threshold short interest ratio leading to discontinuity in clearing prices.
Both in practice and in the academic literature, models for setting margin requirements in futures markets classically use daily closing price changes. However, as well documented by research on high-frequency data, financial markets have recently shown high intraday volatility, which could bring more risk than expecte…
Satellite images improve real-estate price predictions.
problem Improving accuracy of real-estate price predictions.
method Used convolutional neural networks (CNN) to incorporate satellite image data.
result CNN model trained on satellite images and structured data performs 7% better in MAE.
Paper solves stock loan pricing with finite maturity using integral equations.
problem Valuation of margin-call stock loans with finite maturities.
method Fourier Sine transform and Volterra integral equation approach.
result Integral representation of margin-call stock loan value.
Proposes a method to construct risk-neutral marginals from arbitrage-free option prices.
problem Lack of risk-neutral marginals that are free of arbitrage and easy to use.
method Explicit construction of risk-neutral marginals from discrete arbitrage-free option prices.
result Explicit construction guarantees risk-neutral marginals free of butterfly and calendar arbitrage.
Computation of Robust Option Prices via Structured Multi-Marginal Martingale Optimal Transportq-fin.CP
Efficiently computes robust option prices using multi-marginal martingale transport.
problem Computing robust option prices under martingale constraints.
method Extending state space, sequential martingale structure, entropic regularisation.
result Fast computation of optimal solutions for large problems.
Calibration of One- and Two-Factor Models For Valuation of Energy Multi-Asset Derivative Contractsq-fin.PR
We study historical calibration of one- and two-factor models that are known to describe relatively well the dynamics of energy underlyings such as spot and index natural gas or oil prices at different physical locations or regional power prices. We take into account uneven frequency of data due to weekends, holidays, …
The impact of margin trading on share price evolution: A cascading failure model investigationq-fin.GN
Margin trading in which investors purchase shares with money borrowed from brokers is blamed to be a major cause of the 2015 Chinese stock market crash. We propose a cascading failure model and examine how an increase in margin trading increases share price vulnerability. The model is based on a bipartite graph of inve…
A new relaxed framework for pricing illiquid derivatives using bid-ask spreads.
problem Pricing illiquid derivatives with realistic bounds and hedging prices.
method Introducing Bid--Ask Martingale Optimal Transport (BAMOT) that relaxes the exact calibration of model marginals to mid-prices of vanilla options.
result BAMOT yields realistic price bounds and superhedging prices for illiquid derivatives.
The study examines how including additional call option prices affects model-independent price bounds for exotic derivatives.
problem Improving model-independent price bounds for exotic derivatives using additional call option prices.
method Characterization of market settings that guarantee improved price bounds and exclusion of any improvement.
result The inclusion of additional call option prices can significantly impact model-independent price bounds.
The paper analyzes insurance pricing and capital allocation in imperfect markets.
problem Analyzing insurance pricing and capital allocation in imperfect markets.
method Non-additive distortion pricing functional and principle of equal priority of payments in default.
result Derives the natural allocation of premium and margin with properties that merit the name.
In this article we discuss the problem of calculating optimal model-independent (robust) bounds for the price of Asian options with discrete and continuous averaging. We will give geometric characterisations of the maximising and the minimising pricing model for certain types of Asian options in discrete and continuous…
Trading in Complex Networksq-fin.GN
Global supply networks in agriculture, manufacturing, and services are a defining feature of the modern world. The efficiency and the distribution of surpluses across different parts of these networks depend on choices of intermediaries. This paper conducts price formation experiments with human subjects located in lar…
Triangle Feesq-fin.MF
Triangle fees adjust fees based on trade size and price movement, improving price accuracy and revenue.
problem Price staleness and low fee revenue in AMMs.
method Decreasing marginal fees proportional to price movement, creating incentives for price accuracy.
result Triangle fees strictly improve the Pareto frontier of price accuracy versus losses.
Conditional Davis Pricingq-fin.MF
We study the set of marginal utility-based prices of a financial derivative in the case where the investor has a non-replicable random endowment. We provide an example showing that even in the simplest of settings - such as Samuelson's geometric Brownian motion model - the interval of marginal utility-based prices can …
New MKABSDEs help calculate initial margins in financial contracts.
problem Calculating initial margins in financial contracts with dependencies.
method Introduced MKABSDEs, provided existence and uniqueness, applied to CVaR, used deterministic and Monte-Carlo methods for numerical approximations.
result MKABSDEs provide a new way to solve for initial margins in financial contracts.
This paper supplies two possible resolutions of Fortune's (2000) margin-loan pricing puzzle. Fortune (2000) noted that the margin loan interest rates charged by stock brokers are very high in relation to the actual (low) credit risk and the cost of funds. If we live in the Black-Scholes world, the brokers are presumabl…
Researchers find a way to price American options without relying on specific asset price models.
problem Determining the upper bound on the price of American options under model uncertainty.
method Using martingale optimal transport problem to describe model uncertainty and proving that optimal exercise schemes must be nonrandomized under certain conditions.
result The price upper bound and its relaxed version coincide under suitable convexity conditions, removing the need for the model-free price upper bound to be nonrandomized.
Researchers quantify risk exposure and sensitivities in financial markets under model uncertainty.
problem Optimizing investment and pricing under model uncertainty in financial markets.
method Distributionally robust optimization, Wasserstein ball, first-order sensitivity analysis.
result Sensitivities of value function, investment policy, and marginal prices to model uncertainty can be non-monotonic.
MVA Transfer Pricingq-fin.PR
This article prices OTC derivatives with either an exogenously determined initial margin profile or endogenously approximated initial margin. In the former case, margin valuation adjustment (MVA) is defined as the liability-side discounted expected margin profile, while in the latter, an extended partial differential e…
Paper introduces TS-GPT for engineering time series forecasting.
problem Engineering time series require causal operations, unlike linguistic data.
method Innovations representation theory, Generative Pre-trained Transformer.
result TS-GPT effectively forecasts real-time locational marginal prices.
Copulas model cross-product effects in intraday power markets.
problem Intraday power markets' cross-product effects are not adequately addressed by existing univariate approaches.
method Copulas and latent beta regression for modeling high-dimensional intraday price return vector, with time-varying dependence parameter.
result Modeling cross-product effects improves forecasting performance.
This paper investigates the impact of pre-existing offline data on online learning, in the context of dynamic pricing. We study a single-product dynamic pricing problem over a selling horizon of periods. The demand in each period is determined by the price of the product according to a linear demand model with unkn…
Study finds cherry-picking load shaping strategies outperforms others in reducing grid CO2 emissions.
problem Lack of detailed counterfactual data makes it hard to assess load shaping strategies' effectiveness.
method Calibrated granular ERCOT simulations for counterfactual analysis of load shaping strategies.
result LMP-based load shaping outperforms other strategies in reducing grid CO2 emissions.
The introduction of CCPs in most derivative transactions will dramatically change the landscape of derivatives pricing, hedging and risk management, and, according to the TABB group, will lead to an overall liquidity impact about 2 USD trillions. In this article we develop for the first time a comprehensive approach fo…
Shorting in Speculative Marketsq-fin.MF
We propose a continuous-time model of trading with heterogeneous beliefs. Risk-neutral agents face quadratic costs-of-carry on positions and thus their marginal valuations decrease with the size of their position, as it would be the case for risk-averse agents. In the equilibrium models of heterogeneous beliefs that fo…
We discuss utility based pricing and hedging of jump diffusion processes with emphasis on the practical applicability of the framework. We point out two difficulties that seem to limit this applicability, namely drift dependence and essential risk aversion independence. We suggest to solve these by a re-interpretation …
A novel probabilistic approach forecasts imbalance prices in Belgium.
problem Forecasting imbalance prices in short-term energy markets.
method Two-step approach: compute net regulation volume state transition probabilities, then infer imbalance prices.
result The probabilistic approach outperforms deterministic and Gaussian Process models.
Deep neural network predicts event ticket prices considering spatial-temporal data sparsity.
problem Predicting future ticket prices from sparse and spatiotemporal data.
method Bi-level optimizing deep neural network with coarsening and refining layers, bi-level loss function.
result Our model outperforms other methods in real-world ticket price prediction.
Quantum computing speeds up option pricing for multiple assets.
problem High-dimensional integration bottleneck in option pricing.
method Calibrated marginal distributions, Gaussian copula, QAMC with QAE.
result QAMC reduces integration queries by 10-100 times for similar precision.
A model is presented in this work for simulating endogenously the evolution of the marginal costs of production of energy carriers from non-renewable resources, their consumption, depletion pathways and timescales. Such marginal costs can be used to simulate the long term average price formation of energy commodities. …
Companies try to maximize their profits by recovering returned products of highly uncertain quality and quantity. In this paper, a reverse logistics network for an Original Equipment Manufacturer (OEM) is presented. Returned products are selected for remanufacturing or scrapping, based on their quality and proportional…
In this paper, which is the third installment of the author's trilogy on margin loan pricing, we analyze monthly observations of the U.S. broker call money rate, which is the interest rate at which stock brokers can borrow to fund their margin loans to retail clients. We describe the basic features and mean-rev…
In this article we consider the problem of giving a robust, model-independent, lower bound on the price of a forward starting straddle with payoff where . Rather than assuming a model for the underlying forward price , we assume that call prices for maturities $T_0<T_1…
We review the utility-based valuation method for pricing derivative securities in incomplete markets. In particular, we review the practical approach to the utility-based pricing by the means of computing the first order expansion of marginal utility-based prices with respect to a small number of random endowments.
Investigates how multivariate Lévy models affect calibration and pricing.
problem How multivariate Lévy models affect calibration and pricing.
method Calibration methods of Luciano and Semeraro (2010) and Ballotta and Bonfiglioli (2016) are studied.
result Models can fit market data and price exotic derivatives with rich dependence structures.
Quantization Under the Real-world Measure: Fast and Accurate Valuation of Long-dated Contractsq-fin.CP
This paper provides a methodology for fast and accurate pricing of the long-dated contracts that arise as the building blocks of insurance and pension fund agreements. It applies the recursive marginal quantization (RMQ) and joint recursive marginal quantization (JRMQ) algorithms outside the framework of traditional ri…
Inference in general Markov random fields (MRFs) is NP-hard, though identifying the maximum a posteriori (MAP) configuration of pairwise MRFs with submodular cost functions is efficiently solvable using graph cuts. Marginal inference, however, even for this restricted class, is in #P. We prove new formulations of deriv…
New method measures price elasticity from daily sales data.
problem Estimating price elasticity from heterogeneous data.
method Factor-Adjusted Regularized Method for Treatment evaluation (FarmTreat).
result High degree of heterogeneity in pricing strategies.
In this paper we describe how to include funding and margining costs into a risk-neutral pricing framework for counterparty credit risk. We consider realistic settings and we include in our models the common market practices suggested by the ISDA documentation without assuming restrictive constraints on margining proce…
New method separates model and non-model risks for more practical asset pricing.
problem Asset pricing under model-uncertainty.
method Binary model-risks and constraints over preferences; unique model-risk pricing formula.
result Unique model-risk pricing formula with dynamically conserved constant.